Member Briefing December 4, 2023
ISM Manufacturing & All Major Components in Contraction
The Institute for Supply Management’s Purchasing Managers Index, or PMI, came in at 46.7 for November, unchanged from October. The reading, released Friday, means the U.S. manufacturing sector has contracted for 13 consecutive months. A number above 50 indicates growth. Things have been contracting for a very long time. It’s the longest consecutive contraction streak in decades. The new orders index, which is a gauge of future demand, came in at 48.3, still contracting, but up from 45.5 in October.
“Demand remains soft, and production execution is slightly down compared to October as panelists’ companies continue to manage outputs, material inputs and, more aggressively, labor costs.” ISM PMI survey chair Tim Fiore said in a news release. With less work to be done, industry-oriented businesses are cutting back on hiring with the employment component falling deeper into contraction at 45.8. Orders are also still falling, though not as much as last month, but the production pipeline is looking worryingly thin with the index for backlog of orders falling to 39.3.
War in Israel Headlines
- Israel and Hamas: The Latest News – The Guardian
- Gaza's Fear and Anger as Ceasefire Ends and Fighting Erupts - BBC
- UAW Union Calls for "Immediate, Permanent Cease-Fire" in Israel-Hamas War - CBS
- Israel Widens Evacuation Orders as it Shifts Offensive to Southern Gaza - Politico
- Israeli Bombing of Gaza Intensifies, Refugee Camp Reported Hit - Reuters
- Why The Gaza Ceasefire Came to an End? - BBC
- Who Are the Hostages Still Remaining in the Besieged Strip? - AP
- The Shadowy Hamas Leader Behind the War Against Israel - NPR
- Interactive Map- Israel’s Operation in Gaza – Institute for the Study of War
- Map – Tracking Hamas’ Attack on Israel – Live Universal Awareness Map
War in Ukraine Headlines
- Ukraine and Russia: The Latest News – The Guardian
- Putin Seems to be Winning the War in Ukraine—for Now – The Economist
- Russia to Boost Size of Army by 15% to 1.32 Million - CNN
- Ukraine’s Zelenskyy Says the War With Russia is in a New Phase as Winter Looms - AP
- Zelensky Says Fortifying Front Lines Must be Accelerated - BBC
- Russia's 'Other' War With Syria Holds Sobering Lessons on Ukraine - Politico
- Crossing the Dnipro: What a Ukrainian Military Operation Might Mean - NYT
- Surrounded by Russians This Ukrainian Soldier Called in an Artillery Strike – On His Own Position - CNN
- Interactive Map: Assessed Control of Terrain in Ukraine – Institute for the Study of War
- Map – Tracking Russia’s Invasion of Ukraine – Live Universal Awareness Map
PCE, Fed’s Favorite Inflation Gauge, Shows Inflation Rose 0.2% in October and 3.5% From a Year Ago
Inflation as measured by personal spending increased in line with expectations in October, possibly giving the Federal Reserve more incentive to hold rates steady and perhaps start cutting in 2024, according to a data release Thursday. The personal consumption expenditures price index, excluding food and energy prices, rose 0.2% for the month and 3.5% on a year-over-year basis, the Commerce Department reported.
Headline inflation was flat on the month and at a 3% rate for the 12-month period, the release also showed. Energy prices fell 2.6% on the month, helping keep overall inflation in check, even as food prices increased 0.2%. Goods prices saw a 0.3% decrease while services rose 0.2%. On the services side, the biggest gainers were international travel, health care and food services and accommodations. In goods, gasoline led the gainers. Personal income and spending both rose 0.2% on the month.
Global PMI: Factory Activity Stays Weak
Global manufacturing activity remained weak in November on soft demand, surveys showed on Friday, as euro zone factory activity kept contracting, while there were mixed signs on the strength of China's economy. In the 20-member euro zone, Hamburg Commercial Bank's final manufacturing Purchasing Managers' Index (PMI), compiled by S&P Global, was firmly below the 50 mark dividing contraction from expansion in a broad based downturn. Still, it did rise to 44.2 in November from October's 43.1, above a 43.8 preliminary estimate.
China's private Caixin/S&P Global manufacturing PMI unexpectedly rose to 50.7 in November from a 49.5 reading in October, surpassing analysts' forecasts. Export-reliant Japan, South Korea and Taiwan bore the brunt of sluggish global demand with their manufacturing activity remaining stagnant in November, surveys showed. Japan's final au Jibun Bank manufacturing PMI fell to 48.3 in November from 48.7, shrinking at the fastest pace in nine months. South Korea's PMI stood at 50.0 in November, rising slightly from October's 49.8. Manufacturing activity also shrank in Taiwan, Vietnam and Malaysia, but expanded in India, Indonesia and the Philippines, the surveys showed.
COVID 19 News – “Poos Clues:” CDC Improves Its Wastewater Dashboard
The CDC just unrolled a new wastewater reporting dashboard. Niall Brennan, senior advisor for Data Strategy to Mandy Cohen, the Centers for Disease Control and Prevention’s director, described its data visualization as “underwhelming to say the least.” So in the past month, with a team called “Poo’s Clues,” the agency redesigned the site to provide better information. As Brennan noted, you can see “national trends in Covid-19 viral activity in wastewater in 1 year, 6 month and 45 day increments.”
You can also visualize data at the state and territory level. There are also color-coded maps to show the intensity of virus activity. Another, more complicated graphic, shows the proportions of different variants of Covid-19 but is difficult to understand.
NYS COVID Update
The Governor updated COVID data for the week ending December 1st.
Deaths:
- Weekly: 63
- Total Reported to CDC: 81,163
Hospitalizations:
- Average Daily Patients in Hospital statewide: 1,465
- Average Daily Patients in ICU Statewide: No Data
7 Day Average Cases per 100K population
- 11.0 positive cases per 100,00 population, Statewide
- 10.1 positive cases per 100,00 population, Mid-Hudson
Useful Websites:
New York Launches Bid to Save Floundering Offshore Wind Projects
New York extended a lifeline last week to four offshore wind projects struggling to stay afloat, saying it will accept bids for new offshore wind proposals until the end of January. The announcement is part of New York’s plan to rescue offshore wind projects struggling with higher construction and financing costs. It opens the door for four offshore wind projects to be paid higher electricity prices for their power after state regulators rejected their request to amend their existing power contracts in October.
While the bids are open to all developers capable of serving the state, the expedited bidding process is widely viewed as an attempt to rescue one project planned by Ørsted and Eversource Energy, and three projects developed by Equinor and BP. The average price paid to the three projects receiving a contract was $145 per megawatt-hour. Ørsted initially requested a $139-per-MWh adjustment for its Sunrise Wind project, a 27 percent increase over the price initially agreed to with the state. Equinor and BP sought an average price of $176 per MWh for their three projects, up from an initial price of $113 per MWh.
2024 Hudson Valley Congressional Races Taking Shape
All three of the Congressional Districts in the Hudson Valley are anticipated to be highly competitive contests in 2024 and this week candidates in two of the three races made big moves that will likely secure their place on the ballot for November. The races will be instrumental in determining which party controls the House of Representatives in the next Congress. The makeup of the districts may still change pending legal wrangling as well.
In the 17th Congressional District, currently represented by Republican Mike Lawler of Rockland County, candidate Liz Whitmer Gereghty officially suspended her campaign and endorsed former Congressman Mondaire Jones. Jones represented the 17th district for one term, before he unsuccessfully sought reelection in New York City’s 11th district. In the 18th Congressional District, currently represented by Democrat Pat Ryan of Ulster County, candidate Alison Esposito collected the endorsements of eight current New York House Republicans as well as the endorsement of her former running-mate, former Congressman and Gubernatorial candidate Lee Zeldin.
George Santos Has Been Expelled from Congress. Here's How his Replacement Will be Chosen
Rep. George Santos, the beleaguered Republican who represented New York's 3rd Congressional District, has officially been expelled from Congress over alleged ethics violations and other accusations of wrongdoing. Santos steadfastly defended himself, including by labeling a scathing report from congressional investigators as a "smear." But the vote to remove him passed with bipartisan support, and there are now 434 members of the House.
His expulsion means his seat in New York’s 3rd District is now vacant, and under Article I, Section 2, Clause 4 of the Constitution, the executive of the state must hold an election to fill the seat. NY Governor Kathy Hochul has 10 days to schedule a special election, and it must take place 70 to 80 days later. Hochul sparked confusion with a comment she made on social media indicating that she intends to fill the seat herself, and not hold a special election to fill the vacancy. "I am prepared to undertake the solemn responsibility of filling the vacancy in New York’s 3rd District. The people of Long Island deserve nothing less," Hochul wrote on X, with no mention of a special election. She has since clarified her remarks.
U.S. Construction Spending Rises in October
U.S. construction spending increased more than expected in October amid strong gains in single-family homebuilding, but data for the prior month was revised lower. The Commerce Department said on Friday that construction spending rose 0.6%. Data for September was revised down to show construction spending climbing 0.2% instead of 0.4% as previously reported. Construction spending accelerated 10.7% on a year-on-year basis in October.
Spending on private construction projects increased 0.7% in October with investment in residential construction shot up 1.2%. Spending on new single-family construction projects surged 1.1%. Strong new single-family homebuilding helped to end nine straight quarters of decline in residential investment in the third quarter. Outlays on multi-family housing projects fell 0.2% in October. Spending on manufacturing construction projects rose 0.9%, still supported by the Biden administration efforts to bring semiconductor manufacturing back to the United States. Spending on public construction projects increased 0.2%.
UAW Launches Unprecedented Push to Organize 13 Automakers in US
After winning record labor contracts this month with the Detroit Three car companies, the United Auto Workers is now taking on all nonunion automakers operating in the United States in a massive and unprecedented public organizing campaign. On Wednesday, the UAW said workers at more than a dozen nonunion automakers across the United States have announced simultaneous campaigns to join the UAW. According to a UAW flyer made available to the Detroit Free Press and expected to be made public on social media and in factories in coming days, here's how the organizing process will work:
Once 30% of workers at a plant sign union cards on the UAW's website, a committee of plant autoworkers will go public to say the facility is working toward unionizing.
Once half the workforce signs the cards, a public rally with UAW President Shawn Fain and other leaders will be held to demonstrate support for union representation.
After 70% of the workforce has signed the cards, an organizing committee made up of plant workers will demand that the company recognize the union. If it does not, the UAW will file cards with the National Labor Relations Board and takes it to a plant vote.
To complement the effort, the union is launching Wednesday a three-minute video on social media outlining the benefits of belonging to the union.
New Offer Seeks to Revive Yellow
Sarah Riggs Amico, executive chair of auto carrier Jack Cooper Transport, is leading a bid that would replace Yellow, which shut down over the summer, with a smaller, leaner trucking company that aims to win back some of the billions of dollars worth of freight business that has shifted to a range of other carriers. The bid faces major hurdles, including persuading the federal government to extend a $700 million loan made to Yellow during the Covid-19 pandemic that is due in 2024. It also comes as Yellow is deep in the process of selling off tens of thousands of trucks and trailers and about 170 North American truck terminals, assets that have been valued at a total of more than $2 billion.
Amico’s bid includes $1.1 billion in financing, along with requests to major creditors. Her group wants the federal government to push back repayment of a pandemic-era loan. But a person familiar with the request says the Treasury Department believes it can’t modify the loan without new authority from Congress.
Ford Says UAW Strike Cut Profits by $1.7B; New Contract to Cost $8.8B
Ford Motor on Thursday pegged the cost of a new labor deal at $8.8 billion and joined rival General Motors in cutting its full-year profit forecast due to lost production from a lengthy strike at its U.S. plants. The deal with the United Auto Workers (UAW) union, reached after weeks of tense negotiations, will add about $900 in labor costs per vehicle by 2028. Ford said it would work to offset that by cutting costs elsewhere.
The automaker now expects adjusted earnings before interest and taxes (EBIT) of $10 billion to $10.5 billion for 2023, down from its prior forecast of $11 billion to $12 billion offered in July. The forecast includes $1.7 billion in lost profits from the strike, which Ford also estimated led to about 100,000 units fewer wholesale vehicle sales. Already grappling with losses in its EV business due to softening consumer demand, Ford had also said it would slash future EV investment plans by $12 billion. Dearborn-Michigan based Ford last Thursday also cut its 2023 adjusted free cash flow forecast to between $5.0 billion and $5.5 billion, compared with its prior forecast of between $6.5 billion and $7 billion.
OPEC Plus Producers Announce More Production Cuts After Meeting
Several OPEC+ countries agreed to voluntarily cut oil production by a total of 2.2 million barrels per day in the first quarter of 2024, the oil producing group announced Thursday. Saudi Arabia, the world’s biggest exporter of crude oil, will lead the effort by extending a voluntary production cut of 1 million barrels per day of oil — previously intended to run till the end of December — by another three months, according to a statement from OPEC+, which comprises the Organization of the Petroleum Exporting Countries and its allies.
In addition to Saudi Arabia, the following voluntary barrel-per-day production cuts were announced: Russia by 500,000; Iraq by 223,000; the United Emirates by 163,000; Kuwait by 135,000; Kazakhstan by 82,000; Algeria by 51,000 and Oman by 42,000, OPEC+ said. Despite pledges by the group this year to slash output by 3.66 million barrels per day until the end of 2024 — and additional voluntary cuts by Saudi Arabia and Russia — Brent and WTI prices have now fallen 13% and nearly 16%, respectively, since their peaks in late September.
Rolls-Royce Reveals Transformation Plans Targeting Large Profit Increase
British aerospace giant Rolls-Royce has revealed its plans to quadruple profits in the next four years as CEO Tufan Erginbilgic looks to transform the company and recover from its financial issues. The former BP executive was brought in as CEO at the beginning of the year and has already made changes including significant job cuts of up to 2,500 in October as part of a focus on “efficiency, simplification and synergies.”
The company revealed its new strategy and profit targets during a Capital Markets Day that redefined its mid-term targets to aim for an operating profit of between £2.5bn to £2.8bn and an operating margin of 13-15% by 2027. Erginbilgic said: “We are creating a high-performing, competitive, resilient and growing Rolls-Royce that will have the financial strength to control and shape its own destiny.” The company revealed that it would be looking at exiting “non-core businesses” including selling its Rolls-Royce Electrical business that works on advanced air mobility projects, saying this would allow it to focus on “core electrical engineering activities” in Power Systems, Defence, and Civil Aerospace.
Read more at Airport Technology (UK)
Fraud Investigations into COVID-Era PPP and EIDL Loans Increasing
The Department of Justice continues to have its task forces throughout the U.S. investigate and prosecute fraudulent use of funds from the Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) programs which were widely deployed during the pandemic. Many small businesses throughout New York State and the nation are receiving subpoenas, civil investigative demands, or other notices of civil and criminal fraud investigations.
There are serious penalties associated with PPP and EIDL fraud and if a business or individual receives a subpoena or civil investigative demand for information, it should be taken seriously. Things to keep in mind: The impetus for launching an investigation varies, and could be spurred by a whistleblower, the lender, or the federal agencies tasked with pursuing instances of fraud. Investigations are not exclusively focused on misuse of proceeds. They’re also looking at technical or clerical errors with statements made on original PPP applications. Investigations are not isolated to large sum loans. Investigations are location agnostic, and not isolated to the largest U.S. districts.
New Poll: More CEOs Looking For Automation To Blunt Soaring Labor Costs
Faced with soaring labor cost inflation and shortages of key employees across nearly every industry, U.S. business leaders are increasingly turning to technology for answers, fueling a push for automation solutions unlike any in recent memory. That trend will only accelerate in the year to come. That’s the big takeaway from Chief Executive’s latest polling. Among the 182 CEOs we surveyed November 7-9, as part of our monthly CEO Confidence Index, the number one strategy being pursued to offset rising labor costs in 2024 was automation and technology investment, with 59 percent saying it was their first choice. That topped all other strategies including price increases, finding new revenue streams and reskilling existing workers.
New productivity-enhancing technology like generative AI has become far more flexible, intelligent and inexpensive to deploy. “Digital transformation, specifically with enhanced workflow and elimination of redundant manual tasks are critical as employers are seeking efficiencies in the back-office functions,” said Neville Kadimi, CFO at Diamond Wipe. Among those surveyed, however, 88 percent said they expected to displace fewer than 5 percent of their workforce with automation in the year to come, and a full 40 percent said they did not expect technology to displace any workers at their firms, at least not in the next 12 months. No one responding to the survey expected to displace 15 percent or more of their workforce with technology.
EPA Launches Crackdown on Methane
The Environmental Protection Agency unveiled sweeping new regulations targeting methane emissions from the oil and gas sector on Saturday. The rule’s 3 a.m. rollout was timed to coincide with the ongoing U.N. climate talks in Dubai, where the U.S. has sought to play a leading role in global efforts to reduce emissions of the powerful planet-heating gas. But its biggest test will be in the legal arena at home, where conservatives on the Supreme Court have slapped down regulations the justices viewed as White House overreach.
EPA Administrator Michael Regan in a statement called the rule a “strong action” that “significantly” curbs methane pollution. The rule strengthens existing standards for new pollution sources and for the first time will require producers to upgrade equipment and actively search for leaks at hundreds of thousands of wells and other oil and gas infrastructure. In a major change from current practice, companies would no longer be allowed to depend on calculated estimates to report how much methane leaks from their sites. Instead, they will have to use sensors and other equipment to take measurements.
Sandra Day O’Connor, First Woman on the Supreme Court, Dies at 93
For nearly a quarter-century, Sandra Day O’Connor, who died Friday at age 93, was perhaps the most powerful woman in America, often casting the deciding vote when her Supreme Court colleagues divided 4-4 along ideological lines. Her decisions on issues including abortion, affirmative action, voting rights and the line between church and state often reflected a pragmatic middle ground that frequently aligned with mainstream public opinion.
Some “criticized her for lacking principles,” said University of Chicago law professor Anup Malani, a former O’Connor clerk. “Her principle was the need to compromise and come together as a community.” O’Connor “did not temper her analysis to be in line with what the public thought,” said retired Arizona Supreme Court Chief Justice Ruth McGregor, who clerked for O’Connor just after her 1981 appointment. Rather, O’Connor’s decisions tracked the mainstream “because her thinking was very much in line with public opinion,” McGregor said. “That’s who she was.”